5 Reasons to Fear the Market Selloff

Trouble in emerging markets, earnings reports among reasons why you should be getting defensive

Suddenly, investors who were lulled into a warm, comforting sense of complacency in December are being hit in the face with the arctic chill of reality. No, not all is well. No, cheap money cannot solve all our problems. And no, the ongoing tapering of the Federal Reserve’s QE3 bond purchase stimulus is not as benign as the bulls would have you believe.

Source: iStockphoto.com

Stocks are falling hard today, with the Dow Jones Industrial Average down 3.6% from its ridiculous New Year’s Eve melt-up, falling through its 50-day moving average and threatening to close below the psychologically important 16,000 level.

This is the most significant downtrend initiation since September, when the market started worrying about the October debt ceiling deadline — a deadline that was pushed back to February, unleashing a powerful market rebound.

Unfortunately, the current pullback has many more catalysts, which means it won’t be so easily reversed.

Here are five reasons you should be worried, and be prepared for a more protracted decline.